In 2010, the $121.1B Massachusetts Pension Reserves Investment Management Board’s hedge portfolio sprawled across five fund-of-funds managers and hundreds of individual managers — complex, costly, and underperforming. Not anymore.
Fast forward 15 years, and the story has flipped: the same allocation now posts an 11.5% one-year return, 3.5 percentage points above its benchmark, with three-year performance equally strong, according to meeting materials from a recent meeting.
The architect of this transformation is Bill Li, senior investment officer and director of portfolio completion strategies, whose team has spent more than a decade reshaping the portfolio into a streamlined, high-performing engine. “Back in 2010, this portion of our portfolio was underperforming,” noted Michael G. Trotsky, the pension fund’s chief investment officer, in his board report.
Li’s approach was surgical as the hedge fund allocation is now concentrated in a couple dozen talented managers and mostly structured as separate accounts — a model the PRIM pioneered in public pensions and one that has since become industry standard. Separate accounts give the fund more control, lower fees, and customization that can be calibrated to both risk and return objectives.
As part of the overhaul of the portfolio, Li’s team developed sophisticated quantitative screens to identify managers with truly differentiated skills and implemented rigorous oversight to monitor ongoing performance, highlighted the CIO’s report. This focus on both quality and accountability has turned what was once a weak spot into a core driver of returns.
Most recently, the PRIM split the portfolio into two distinct strategies namely directional hedge funds that track equities and bonds but with superior risk-return profiles, while stable value hedge funds provide low-correlation returns, offering steadier performance when markets wobble. The dual strategy ensures the fund captures upside without exposing retirees to outsized losses — a balancing act that has historically challenged large pension funds, noted the CIO’s report.
The hedge fund success is part of a broader strategic PRIM story. The pension fund achieved a 12-month net gain of $10.6B for the one-year period ended Sept. 30, 2025. Private equity has posted 11 consecutive positive quarters, real estate is rebounding, and fixed income strategies remain robust. Yet it is the hedge fund overhaul that stands as a testament to disciplined execution, structural innovation, and long-term vision.
Most recently, Ethan Spencer was promoted to senior investment officer and director of fundamental hedge funds, and he will be reporting to Bill Li, noted the meeting materials.
